You’ve received a letter accusing you of being in breach of contract or maybe you want to make a claim. What should you do?
Step 1 – Get the contract documents together
The first step in a contract claim is ascertaining exactly what the contract was.
The contract may be a formal written contract but often it consist of a combination of orders, letters, terms & conditions, emails, phone calls, meeting notes and so on. The documents that are important are generally those that were made before the project started.
It is often difficult to work out exactly what documents form ‘the contract’ or even amount to evidence of what was agreed orally. Many documents should be ignored for these purposes. Also, some contractual terms, even if written in the contract, might be of no legal effect and others are implied into the contract even if they were not there at all! It is therefore essential to obtain legal advice once you have all the documents together.
The following are rough guidelines:
- Is there a written contract? If so, does it say that it is an entire agreement and/or that no party can rely on any representations made? If so, it might be that this document is the only one that can be considered to form the contract.
- Were there any standard terms and conditions – either yours or the other parties? They can be terms and agreements from previous dealings between the same parties. If so, then these may form part of the contract. However, many clauses excluding liability may be unenforceable in certain circumstances.
- Some terms form part of the contract even if they were never written down or discussed. These include clauses that any goods supplied will be of satisfactory quality, that services will be performed with reasonable care and skill and within a reasonable time or, sometimes, terms that a court simply considers necessary to allow the contract to work.
Step 2 – Ascertain what the breach of contract is
For there to be a breach of contract, one or more of the contractual terms must actually be breached. There is no breach if things simply did not go as one party expected – there must be an actual breach of one of the contractual terms.
Make a note of what the breaches were, what was done to try to rectify things (if anything) and why that didn’t work out.
Step 3 – Damages
In breach of contract cases, damages are designed to put the injured party in the same position they would have been had the contract been performed properly as far as possible. They are not designed in English law to punish the offending party and usually they do not amount to full compensation. If you are the victim of a breach of contract, it is likely that you will not be fully compensated but certainly, by taking action, you can obtain damages that will go a long way towards undoing some of the losses suffered.
Damages can include:
- loss of profits (if these can be ascertained);
- costs and expenditure wasted because of the breach;
- the costs of putting things right;
- consequential losses, especially if these were mentioned before the contract was formed or would be a reasonable consequence of the breach.
Make a list of all the losses you incurred in each of the above scenarios. Attach to them, all the documents that support your figures. Then take legal advice on what you can actually claim in your case.
Breach of contract cases are usually very complex legally, especially as to what the contract actually is and what damages you can obtain in any particular case. The courts may also penalise the innocent party if it did not take reasonable steps to minimise its losses and, in some cases, may order the guilty party to perform the contract.
Our advice is to put get your paperwork together as soon as possible and then to take legal advice.